Commerce Unsolved Sample Paper Solutions ISC Class 12

Section-A

Answer 1.

(i) (b) social environment

 Explanation :

The social environment consists of all the social and cultural forces within which business firms operate. Such type of environment describes the characteristics of the society in which the organisation exists. It includes components such as social attitudes, customs, traditions, rituals, culture, life styles, etc.

(ii) (b) Stock option

 Explanation :

Stock option is a kind of financial incentive. The other three options as given in the question that is, promotion, job security and employee participation are non-financial incentives that focus on psychological and social needs of the employees.

(iii) (a) Cooperation, Not individualism

 Explanation :

The principle of Cooperation, not individualism is given by F.W. Taylor. All the other principles are given by Fayol.

(iv) (c) Sales promotion

 Explanation :

Promotion of products through an exhibition is one of sales promotion tools in marketing.

(v) (d) to establish standards

 Explanation :

The first step in the controlling process is to set the performance standards. Standards are those criteria, on which the actual performances are measured. These standards serve as a benchmark towards which an organisation strives to work.

(vi) (b) Organisational culture

 Explanation :

Organisational culture comes under the internal environment of the business firm.

(vii) (c) Assertion is true but Reason is false.

 Explanation :

Delegation means transfer of authority or power from the centralised system to smaller departments or units. Thus, the reasoning contradicts the assertion.

(viii) (a) False

(b) False

(c) False

(d) False

(ix) (c) Self-help or Self-regulation

 Explanation :

Self-help or Self-regulation is a voluntary imposition of discipline used by manufacturers to enable consumer protection. It involves ethical practices in dealing with consumer to serve their interest. Serving consumers is in the best long-term interest of business. Most of the forward-looking organisations follow
this practice.

(x) Short message Service

 Explanation :

SMS (Short Message Service) is a text messaging service component of most telephone, internet, and mobile device systems.

(xi) To get steady income without any risk Rohan should invest in preference shares. Preference shares are the shares which carry certain privileges or preferential rights – both regarding the fixed rate of dividend and repayment of capital in the event of winding up of the company.

(xii) The marketing function described in the above lines are physical distribution. Physical distribution refers to the movement of finished goods from a company’s distribution and fulfilment network to the end user.

(xiii) (d) All of these

 Explanation :

Leadership is a key factor in making an organisation successful because good leaders always produce good results through their followers. A leader maintains personal relations and influences the behaviour of the people. He provides needed confidence, support and encouragement to the people by managing conflicts. He introduce changes and influences people to accept them without resisting it.

Section-B

Answer 2.

  • (i) The importance of the business environment is as follows :
  • (a) Identification of opportunities to get first mover advantage: Opportunities refer to the positive external trends and changes that will help a firm to improve its performance. The environment provides numerous opportunities for business success.
  • (b) Identification of threats and early warning signal: Threats refer to the negative external trends and changes that hinder a firm’s performance. Besides opportunities, environment happens to be the source of many threats. Awareness of the environment can help managers to identify different threats on time and serve as an early warning signal.
  • (c) It helps in tapping useful resources : The environment is a source of different resources for running a business. To involve in any type of activity, a firm collects different resources known as inputs such as finance, machines, raw materials, power, labour, etc., from its environment including financiers, the government and suppliers.
  • (d) It helps in coping with rapid changes: The business environment is getting increasingly dynamic where changes are taking place at a fast rate. All sizes and types of enterprises are facing increasingly dynamic environment. Changing market conditions, less brand loyalty, divisions and sub-divisions of markets, more demanding customers, rapid changes in technology and intense global competition are just a few of the examples used to describe today’s business environment.

OR

(ii)

Basic Fixed Capital Working Capital
1. Purpose It is required for investment in fixed asset. It is required for investment in current assets.
2. Time Period It is invested for a long-term. It is invested for a short-term.
3. Performance It provides solvency to the concern. It provides liquidity to the concern.
4. Source It is generally raised through shares, debentures and long-term loans. It is generally raised through public deposit, trade credit and banks.

Answer 3.

  • Important factors affecting the capital structure of a company are given below:
  • (a) Cash flow position: Size of projected cash flows must be considered before issuing debt. The cash flows must be adequate to pay interest and repay the loan, apart from meeting other requirements of the business.
  • (b) Cost of capital: The relative cost of debts and equity must be considered while deciding the capital structures. Cost of making a public issue of shares and debentures (flotation costs) also affect the choice between equity and debt.
  • (c) Return on investment: Return on Investment (ROI) shows the profitability of an investment. If the rate of earnings on investment is high, the company can safely raise more capital through debt.
  • (d) Risk: Use of debt involves more risk as compared to equity. Further, there is also an operating risk which arises out of high fixed operating cost. A company’s capacity to use debt increases when the business risk is low.

Answer 4.

The shares that allow shareholders to receive dividends announced by the corporation before getting them to the equity shareholders are known as Preference shares, or preferred stocks.

Following are the merits of preference shares :

  • (a) Steady Income: As preference shareholders are paid a fixed rate of return, they tend to provide a steady income and safety of investment.
  • (b) Preferential right: Preference shareholders have a preferential right of repayment over the equity shareholders in the case where the company gets liquidated.
  • (c) No creation of charge: No charge is created against any of the assets of the company by the preferential capital.
  • (d) No dilution of rights:Issue of preference shares does not affect or dilute the control of equity shareholders over the management. This is because preference shareholders are not given any voting rights.

Answer 5.

The four functions of the supervisor are as follows:

  • (a) Maintains day to day contact: A supervisor maintains day to day contact with the workers. A supervisor maintains friendly relations and a positive attitude towards workers. He is directly linked with the workers. A good supervisor plays the role of guide, philosopher, and friend.
  • (b) Gives feedback: A supervisor evaluates the work performance of the workers based on the targets assigned to them. He gives feedback to the workers. He advises ways and means to improve and develop the skills of the workers.
  • (c) Provides on-the-job training: A supervisor provides on-the-job training to the employees which helps in forming an efficient team.
  • (d) Builds high morale among the workers: A supervisor who possesses good leadership qualities creates high morale among workers. With his leadership qualities, he/she motivates and influences the behaviour of workers to achieve desired goals.

Answer 6.

The importance of  decentralisation is as follows :

  • (a) Relief to top management: Decentralisation disperses the authority from a higher level to the lower levels of the management hierarchy. Decentralisation provides relief to the top management because they have more time to concentrate on policy decision e.g., to formulate new strategies, coordination, and control, etc.
  • (b) Develops initiative among employees: Decentralisation promotes self-reliance and confidence among employees by developing initiative among subordinates. When lower level employees are given the freedom to make their own decisions it helps them to learn to depend on their own judgment.
  • (c) Quick decision-making: In the case of a decentralised organisation the decision making is fast because the decisions are taken at levels that are nearest to the points of action and there is no need for approval from many levels.
  • (d) Facilitates growth: It facilitates growth as it fosters competition amongst the departments and increases productivity. Therefore, more profits can be generated which in turn can be used for growth and expansion purposes.

Answer 7.

Packaging is the process of designing and producing the package for a product. A package is a wrapper or container in which a product is enclosed or sealed.

A well-designed good packaging generally has the following features :

  • (a) Convenient: Good packaging should be convenient. Package should be made in a way, that the product could be conveniently taken from one place to another and can be handled easily by consumers.
  • (b) Attractive : Package should be very attractive and fascinating. Attractive packaging draws customer’s attention. Colour, picture, design, size, etc. of package can dramatically influence a customer’s mind. Sometimes, customers demand product due to the attractive packaging.
  • (c) Economical: The other feature of good packaging is to be economical. It should not be costly. If the packaging is expensive, it increases the price of the product. As a result, it becomes difficult to sell the products. So, packaging should neither be costly nor clumsy.

Answer 8.

Maslow’s hierarchy of needs highlighted in the example are as follows:

  • (a) Security needs : Gru Ltd. provides medical insurance to employees and reimburses all medical expenses of the employees’ family members thus making them feel physically and emotionally secure at the work place.
  • (b) Social needs :Gru Ltd. provide opportunities to their employees to participate in sports organised in the city-based sports club thus catering to their social needs such as friendship and a sense of belongingness and acceptance.

Answer 9.

  • (i) (a) Under the Consumer Protection Act, 2019, the term ‘consumer’ has been defined as any person who buys goods or hires or avail of any service for a consideration which has been paid or promised or partly paid and partly promised or under any system of deferred payment. It also includes any user of such goods with the buyer’s approval or any beneficiary of services when such goods or services are availed of with the approval of the person concerned but does not include a person who avails such services for any commercial purpose.
  • (b) Self Help is the best method of consumer protection which involves becoming aware about consumer rights and responsibilities and taking adequate protections in buying goods and using services so that consumer interest are protected.

OR

Training is important in every organisation, as it aims at building the skills and abilities of the employees to perform their tasks. The following points highlight the importance of training in an organisation:

  • (a) Less wastage: Training is a concept that involves a systematic learning of a particular job. It is a more efficient way of learning than any trial-and-error method. It helps in reducing wastage of time and money in an organisation, thus ensuring optimum utilisation of resources.
  • (b) Higher profits: Training enhances the productivity of employees by making them more efficient. Such increase in both qualitative and quantitative productivity, boosts the profits of the company.
  • (c) Managerial efficiency: Training prepares employees to face new challenges, thus helping them to make effective responses to various business problems. It also equips future managers to take precautionary steps in case of emergency.
  • (d) Boost employees morale: Training not only improves the performance, but it also improves the overall attitude of the employees towards job, working conditions and organisation. It helps in reducing absenteeism, labour turnover and grievances among the employees.

Section-C

Answer 10.

(i) Social environment consists of all social activities like culture, traditions, values, beliefs and demographic profile of the members of the society. The social environment consists of the behavioural characteristics of the members of the society through which they behave and make decisions as consumers.

Following are the components of social environment:

  • (a) Demographic trends: This includes the size and distribution of the consumer population, their age, gender ratio, education, income, purchasing power, etc.
  • (b) Social trends : This includes the customs, traditions, values, beliefs and lifestyle of the target consumer groups.
  • (c) Desires and expectations: Desires of the target customer group in terms of product and services and the level of their expectations.

(ii) Environment analysis is the study of various factors of the environment affecting the business, like economic factors, political factors, technological factors, global factors, etc. Environment analysis helps to anticipate opportunities and plan to take appropriate actions to avail these opportunities. By careful analysis of the environment, the business comes to know the opportunities provided and threats posed by the environment.

However, in general, the manager takes the help of SWOT analysis to analyse the environment.

SWOT analysis: SWOT analysis is an analysis of the strengths and weaknesses of the organisation and the opportunities and threats present in the environment. SWOT analysis helps in the formulation of business policy.

Two parts of SWOT analysis are:

  • (a) Strengths and Weaknesses: Strengths and weaknesses are related to internal factors such as finance, technology, production facilities, personnel capabilities, etc. of the business organisation. The ability of a business organisation to exploit the available environmental opportunities depends upon the strength of these internal factors. An organisation should concentrate on such business for which it is most competent in case if it does not possess the necessary strength to exploit the opportunities.
  • (b) Opportunities and Threats: Opportunities and threats are related to the external environment. Good opportunities are provided to the business by changes in the external environment. Similarly, the same is responsible for posing threats to the business. Lower rate of interest, development of new market, new innovations, etc. are some forms of opportunities. Threats may in the form of increased competition, decreasing demand, obsolete technology, etc.

Answer 11.

(i) E.S.O.P: An Employee Stock Option Plan is a scheme under which an employee of the company is given a right to purchase a specified number of its shares at a stipulated price which is below the market price during a given period of time. Only those employees are given this right who fulfill the specified eligibility conditions. This scheme enables the companies to retain efficient employees with the company, reducing the employee turnover. It encourages the employees to work even better. It inculcates a sense of ownership and responsibility amongst employees. This scheme boosts morale and team efforts among employees. The employees who exercise the option may be allowed to pay the money in installments or by way of deduction from monthly salary.

(ii) The features of motivation are as follows:

  • (a) Motivation is an internal feeling: There are internal urges, desires or aspirations of people which affect human behavior. These urges are internal to a human being. For example: Mr. John has an urge or desire to buy a lavish house, a car or to have a good name or fame in society.
  • (b) Motivation can be positive or negative: Motivation is of two types : positive or negative. Positive motivation gives positive rewards such as the increase in salary, promotion, recognition, etc. whereas negative motivation includes punishment, no regular increments, threatening, etc. Positive motivation enhances the performance and morale of employees. In the case of negative motivation, the performance and morale of employees decreases.
  • (c) Motivation is a complex process: Motivation is said to be a complex process because it may not have a similar or uniform effect on all employees. Human beings are heterogeneous. They can be different in terms of their perceptions, reactions, and expectations.

OR

(i) Four limitations of planning are as follows:

  • (a) Planning creates rigidity: Planning involves laying down plans of action in advance. It may lead to internal flexibility and procedural rigidity by compelling the managers to conform to the plans.
  • (b) Costly process: Planning is not only time consuming but expensive also. It is directly proportionate to the time which executives spent on planning. If decisions taken by the management prove to be wrong, then the cost incurred on planning does not justify its gains.
  • (c) Discouragement of initiative: As plans are made by top level management and are implemented by middle and lower level managers, this prevents these managers from taking any initiative and from doing innovative thinking. Thus, planning reduces creativity of the members.
  • (d) Does not work in dynamic environment: Planning is based on anticipation of future happenings. Since future is full of uncertainties, therefore, the forecasts may be inaccurate and the plans will be based on inaccurate forecasts and biased decisions. Thus, planning proves to be a futile exercise and ineffective.

(ii) Staffing is the process which ensures that an organisation has qualified workers available at various levels of management to meet the short-term as well as long-term requirements.

The process of staffing has the following steps:

  • (a) Manpower planning: The first step in staffing is to estimate manpower requirements to carry out business activities. This estimate should be made both function-wise as well as level-wise. The estimate of manpower requirements should be based on the organisation’s strategic plan.
  • (b) Recruitment: The second step in the process of staffing is recruitment. It is the process of searching for prospective candidates/employees and encouraging them to apply for job in an organisation.
  • (c) Selection: Selection is the process of selecting the most competent candidate and rejecting the other among the pool of applicants. Its main purpose is to select the right man for right job because right placement improves the quality and quantity of output. Selection procedure involves many steps.
  • (d) Placement: After selection the selected candidate is offered appropriate job. It is a process of matching the qualities of candidates with the requirements of the job.
  • (e) Orientation:It is concerned with introducing the new employee to the organisation, its procedures, rules and regulations and the people with whom he will interact in doing his job. So that they may adjust quickly and easily in their work environment. The main aims of orientation or induction programmes are: (a) to build up employee’s confidence in himself, (b) to develop a feeling of belongingness and loyalty, (c) to give necessary information to the employee about the work, working conditions, leave rules, etc.
  • (f) Training and development: Nowadays, organisations have some special jobs that demand specialised skills. The newly appointed personnels need to be trained and their abilities improved and developed, to increase the work efficiency. The training and development makes the staff capable to take more difficult and complex tasks in future.

Answer 12.

(i) When it comes to advertising spending, there are a variety of viewpoints. It is considered a social waste because it increases manufacturing costs, lowers social values, and expands consumer requirements and desires. On the other hand, it is considered as advantageous because it aids in raising sales and earnings.
Points arguing that advertising is a waste of money for a business:

Points arguing that advertising is a waste of money for a business:

  • (a) Higher cost: Advertising costs contribute to the cost of the product and the firm, which is subsequently passed on to customers as an additional cost in the form of higher pricing.
  • (b) Causes confusion: It is said that when a huge number of comparable products are advertised, the consumer is frequently confused. Those who support commercials, claim that it assist consumers to have a better understanding of the many products available in the market. As a result, their options broaden, and they are better able to make informed decisions about the products they wish to purchase.

(ii) The Consumer Protection Act provides six rights to consumers. They are as follows:

  • (a) Right to Safety: The consumer has a right to be protected against goods and services which are hazardous to life, e.g., sometimes we purchase food items of low quality, which causes severe problems. Thus, in this case, we should purchase good quality, and F.P.O. labelled products.
  • (b) Right to be Informed: The consumer has a right to have complete information about the product he intends to buy, including its ingredients, date of manufacture, price, quantity, directions for use etc. Under the legal framework of India, manufacturers have to provide such information on the package and label of the product.
  • (c) Right to Choose: The consumer has the freedom to choose from a variety of products. The marketers should offer a wide variety of products and allow the consumer to make a choice and choose the most suitable product.
  • (d) Right to be Heard: The consumer has a right to file a complaint and be heard in case of dissatisfaction with a good or service. Because of this, many enlightened business firms have set up their consumer service and grievance cells.
  • (e) Right to Seek Redressal: The Consumer Protection Act provides several reliefs to the consumer, including replacement of the product, removal of the defect in the product, compensation paid for any loss or injury suffered by the consumer etc.
  • (f) Right to Consumer Education: The consumer has a right to acquire knowledge about products. He should be aware of his rights and the reliefs available to him in case of a product/service falls short of his expectations. Many consumer organisations and some enlightened businesses are taking an active part in educating consumers in this respect.

Answer 13.

(i) Chemex company depends upon external sources of recruitment specifically on placement agencies to look for skilled and qualified candidates.

(ii) The company should conduct intelligence test to determine their power of memory and reasoning abilities and their decision-making capabilities.

(iii) Some of the commonly used training programmes are listed below:

  • (a) Induction training: It is also known as orientation training. It is given to the new recruits in order to familiarise them with the internal environment of an organisation such as, the code of conduct and policies existing in that organisation.
  • (b) Job instruction training: This training provides an overview about the job and experienced trainers demonstrate the entire job. If necessary, additional training is offered to employees after evaluating their performance.
  • (c) Refresher training: This type of training is offered in order to make employees aware about the latest developments in a particular field. This training is imparted to enhance the skills of employees.

(iv) The selected candidates will be given off-the-job training or specifically vestibule training by the company.

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